Do Anticipated Tax Changes Matter? Further Evidence from the United Kingdom

Fabio Bagliano

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: This paper provides some evidence against the rational expectations-permanent income model of consumption behaviour and the Ricardian Equivalence proposition by testing the responsiveness of spending to the implementation of pre-announced changes in income tax. Extending the work of Summer (1991), a long series of recurrent episodes of this kind is for the U.K (1960-1990) is examined. It is found that consumption expenditure strongly reacts to (pre-announced) fiscally-induced changes in current disposable income. This effect is due to the semi-durable and durable components of spending.

Date: 1993-03
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Journal Article: Do anticipated tax changes matter? Further evidence from the United Kingdom (1994)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp0123

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